Background Checks

Pre-Qualification vs. Pre-Approval What's the difference? Getting pre-qualified just means that you have told a lender your income level and your debt and credit information, and the lender has estimated what you can afford. Pre-approval, however, puts you much closer to the actual loan and means that the lender has done the leg work of pulling your credit report, checking your debt-to-income ratio, and has done a more in-depth analysis of your situation. In most cases, you're much better off getting pre-approved so you don't have any surprises when a lender checks your credit report -- particularly if you haven't checked the report yourself first.

A lender will look at your employment and your credit history as indicators of how likely you are to pay back your loan. Lenders want to see stability, which means they will look closely any late payments during the last two years of your credit history. They will pay particular attention to any rent or mortgage payments that were over 30 days past due. They'll look at late payments for credit cards during the last six months.

Your employment for the last two years is also important. Lenders look for steady employment with a single employer for the past two years (or at least employment in the same field). Other income -- such as income earned from part-time, overtime, bonuses, or self-employment -- is also acceptable if it has a two-year history.

Don't be afraid that just because you don't have two years with the same employer behind you won't be able to get a mortgage; you may just have to talk to more lenders and look at different types of loans.

Here is a typical list of the documents you need when applying for a mortgage:

• Money for the closing costs
• Completed sales contract signed by buyers and sellers
• Social Security numbers of all applicants
• Complete address for the past two years (including complete name and address of landlords for past 24 months)
• Name, address, and all income earned from all employers for past 24 months
• Previous two years' W-2 forms
• Most recent pay stub showing year-to-date earnings
• Name, address, account number, monthly payment and current balance for all loans and charge accounts
• Name, address, account number, and balance of all deposit accounts, such as checking accounts, savings accounts, stocks, bonds, etc.
• Three months most recent statements for deposit accounts, stocks, bonds, etc.
• If you choose to include income from child support and/or alimony, bring copies of court records of cancelled checks showing receipt of payment.

A more detailed list can be found here. Your lender and closing attorney will also tell you what paperwork and documents you will need to present at the loan closing.